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# United States Court of Appeals For the Seventh Circuit

No. 12-3115

A P E X D I G I TAL, I N C ORP OR AT E D, Plaintiff-Appellant,

v.

S E ARS , R O E B U C K & C OMPANY , Defen dant-Appellee.
Appe al f ro m the Uni ted S tates Distri ct Co urt fo r the Nor thern Distri ct o f Il l i noi s, Eastern Di v i sio n. No. 1: 09 -cv-01 45 2 — John W. Darrah , Judg e.

A RGU E D S E PT E MB E R 10, 2013

— D E C I D E D N OV E MB E R 20, 2013

Before K AN N E, W I L L I AM S , and T I ND E R

, Circ uit Judges.
K AN N E, Cir cui t Judg e
. Thi s sui t w as brought by Apex Di gital, Incorpor ated, to collect money for goo ds they sold to Sear s, Roebuck & Company

. Apex alleged that Sear s breached their cont r a ct by r efus ing to pay the tot al amount i t ow ed to Apex for goo ds deli v ered. Sear s arg ued that this acti on w as barr e d by t he four -y ear statute of li mi tations set fort h in Section 2–725 of the Uni form Commercial Code (the “UCC”). Both parties mov ed for sum mary judgment. The di stric t court2 No. 12-3115
found that Apex fai led to file su i t wi thin the requis i te tim e period and gr anted Sear s’ motion for sum mary judgment. Apex fi led thi s tim ely appeal. Fo r t he reasons set fort h below , w e affi rm the deci si on of the dis tr i ct court. I. B AC K G R O U N D A. The Univers al T

erms and Condi tions Apex and Sear s enter ed into the Sear s Roebuck & Co. Uni v ersal T

erms and Condi tions (the “UTC”) agr eement on Se p tember 12, 2003. The purpose of the agr eement w as to allow S ears, a re t a ile r

, to place o rder s for goo ds wi th Apex, a manuf acturer of electro ni cs. The UT C c ove re d a l l m e rch an d i se 1

so ld by Apex to Sear s and “appl[i ed] to, and i s incorp o r a t e d int o , all other V

endor Agr eements.” The v endor agr eement s
w ere to “contai n the entire understanding of [Apex] and Sear s wi th res p e ct to the subject matter of such V endor Agr eements[.] ” Furt hermor e, the UTC stated that the agr eements “may not be supplemented or modi fi ed by course of dealing,
course of perfor manc e, any or al commu ni cat i on betw een the parties, or any responses by [Apex],

... unles s such response i s in wr i tin g and ex ecu t e d or consented t o in wr i tin g by Sear s.” Accordi ng to the UTC, the v e nd o r agr eements and purchas e
or ders consti tuted a si ngle agr eement betw een the part i es.

Apex was i n the b usiness of purchasing pro ducts fro m overseas man ufac- 1 turers and marketing and di stributing these pr od ucts i n the Uni ted States under the “A pex” b rand nam e. These pro ducts i nclud ed di g i tal cameras, tel evisi ons, DVD pl ayers, and other consumer e l ectro nics.No. 12-3115 3 B. Payment of Invoices Follo wing the del iver y of goo ds, Apex sent electro ni c inv oic es to Sear s. Though not e x p l i ci tly wri tte n in the UTC, both parties’ recor ds reflect a “Net 60“ payment ter m, meaning payment w as due si xty days from the date of the inv oic e. The parties’ acti ons a l so indi cate that they w ere oper atin g under thi s payment arr angement. Apex accounted for i ts inv oic es to be due si xty days after i ssu ance of each inv oic e. Sear s’ Business Exchange sets fort h the payment t e r ms betw een Sear s and Apex as “Net 60 Re cei pt of Goo ds.” Upon receip t of an inv oic e from Apex, Sear s’ accoun ts pay able system confi rmed the ter ms of the inv oic e a nd then pai d Apex according to the “Net 60“ payment ter m, though Sear s di d not alw ays pay the full amount ow ed. Sear s wi thheld money for expected ret urn s a nd other deducti ons t o whi ch it beli ev ed that i t w ould be entitled in the future. Deduc tions that

we re d i s p u te d b y Ap e x we re l abeled “charge-back deducti ons ”

on Apex’s Inv oic e Repor t. Apex alleges that Sear s ow es $11,940,758.05 in charge-back deduc tions

. Apex also contends that Sear s ow es $3,029,028.00 in unpai d inv oic es. The last inv oic es li sted by Apex that remain outstanding are dated Nov ember 9, 200 4 , a nd consti tuted the final tr ansac tion betw een the tw o p a r t i es. Thus, according to the “Net 60“ pro v isio n, these inv oic es w ere due no later than January 8, 2005. All of the othe r invo ices for goo ds t hat Sear s purchas ed from Apex pre-date the Nov ember 9, 2004 inv oic es.4 No. 12-3115
C. The Return Reserve On or about July 6, 2004, Sear s i mplemented Prog ram Agr eement 9 9 6 7 1 (“ P

A 99671") to create a ret urn reserve on Apex’s accoun t. The ret urn reserve w as an internal accountin g
me ch ani sm used to place a negativ e dollar deducti on o n Apex’s a cc o unt

. In other w or ds, Sear s w ould hold back any p ayment to Apex unti l the amount showing ow ed by S e a r s exceeded the amount o f the reserve.
D. District Cour t Proceedings At the sum mary judgment proceedings, Apex arg ued that i t w as ent i tled to collect money i t beli ev ed Sear s o w e d on the unpai d inv oic es and char ge-back deducti ons. Apex alleged th a t Sear s ow ed $8,185,302.24. The complaint alleged that 2 Se a rs w i th

h e l d m oney and stopped payin g Apex for goo ds that Apex deliv ered. Sear s asserted that Apex’s complaint w as bar r e d by the four -y ear statute of li mi tations, as i t w as fi led on Mar ch 6, 2009. A cc o rdin g to the “Net 60“ payment ter m, the latest expec t e d payment w ould hav e been due no later than Jan uar y 8, 2005,

as the last inv oic e receiv ed w as from Nov ember 9, 2004. Apex maintai ned that the amounts in questi on c ould not hav e been due earlier than January 2006 as Sear s’ payments w ere adv ances again st a debt. Apex also s u gg e s te d that Sear s’ payment

A pex’s Inv oi ce Report contains a p osi tive do l l ar entry of$1 5,1 08 ,07 4.5 5 2 and $2 ,96 0,4 74 .79 of merchandise return c r e d i ts to b e appli ed aga i nst the

sum fo r a net posi tive do l l ar fi gure of $1 2,1 47,59 9.7 6. Apex stated i n i t s Co mplai nt tha t Sears was entitl ed to an addi tio nal $3 ,96 2,2 97 .52 i n cred i ts, l eav i ng a total balance of$8 ,18 5,3 02 .24

.No. 12-3115 5
obli gations w ere held open unti l Apex deter mined the full amount ow ed thro ugh a final accounti ng that w as t o be do ne once the business relat i onshi p ended. Regar ding the deducti ons, the di stric t court found that Apex’s argument w as contrar y to the explic i t language found in the UTC, whi ch allows Sear s to uni later ally deduct from the amount i t ow ed on the inv oic es. Rather than maki ng ad v ance payments to Apex, Sear s pai d each inv oic e separately and too k deducti ons as i t deemed appropr i ate. Each inv oic e and d e d u c ti on wa s i ts own tr ansac tion. The last deducti on occurred

on December 21, 2004, whi ch i s when the statute of li mi tations began to run. Therefore , Apex’s Mar ch 6, 2009 complaint w as fi led four y ears too late and barred by the statute of li mi tations. As for the unpai d inv oic es, Apex arg ued that the “Net 60“ ter m, t a k e n fr om inv oic es, di d not apply

. It arg ued that any change to the UTC had to be in wri tin g by Sear s and, since the inv oic es w ere not si gned by Sear s, the “Net 60“ prov i si on w as inv ali d. The di stric t court conclu ded that whil e t he UTC addressed electro ni c payment of Apex’s inv oic es, i t di d not set fort h a speci fi c tim e that payments w ould be due. Thus, the parties’ course of dealing w as able to supp lement the wri tte n agr eement. As a result, Apex knew o r sh ould hav e known that the payment w as due si xty day s after the receip t of the goo ds. Therefore , the di stric t court found that the breach occurred no later than January 8, 2005, and Apex’s Mar ch 6, 2009 complaint

w as un tim ely fi led and barred by the stat ute of li mi tations.6 No. 12-3115
II. A N A L

Y S I S A. Standard of Review Su mmary judgment i s appropr i ate when “the mov ant shows that t here is no genuine di spute as to any material fac t and the mov ant i s entitled to judgment as a ma t t er of law .” Fed. R. Ci v

. P

. 56(a); see Celotex Corp. v
. Catrett, 477 U.S. 317, 322 (1986). W

e rev i ew t he di stric t court’s deci si on to gr ant sum mary judgment de novo , and gener ally wi ll construe all facts and reasonable inferences in the li ght most fa vo rable to the non-movin g party

. Arizanovska v
. W

al-Mart Stores, Inc. , 682 F .3d 698, 702 (7th Ci r
. 20 1 2 ). Apex, how ev er , fai led to proper ly respond to Sear s’ statement of facts in supp or t of i ts motion for

sum mary judgment as mandated by Nort hern Di st r ict of Illi noi s Local Rule 56.1. It states, “All material facts set fort h in the statement required of the moving party wi ll be deemed to be admi tte d unles s contro v ert ed by the statement of the opposi ng party

.” N.D. Ill. R. 56.1(b) (3)( C); Midwest Imports, Ltd.

v
. Coval , 71 F .3d 1311,1313 (7th Ci r
. 1995). Thus, w e d epart from our usu al deference tow ards t he non-movin g party , Apex, and accept all of Sear s’ unopposed material facts as tr ue. Johnson v. Gudmun dsson , 35 F .3d 1104, 1108 (7th Ci r . 1994). B. Statute o

f Lim itatio ns There i s no di spute that Secti on 2–725 of the UCC, 810 I L L

. C OMP

. S T

A T

. 5/2–725, governs the outcome of thi s sui t. It states, “An acti on for breach of any contract for sale must be co mmenced wi thi n 4 y ears after the caus e of a ct io n has accrued.” 810 I L L

. C OM P

. S T

A T

. 5/2–725(1). The central i ssu e i s when the

cause of acti on accrued. Apex bri ngs thi s caus e of acti on for breach of contract for fai lure to pay inv oic es and also maintai nsNo. 12-3115 7
that S ears ow es for wrong ful deducti ons i t took when payin g the inv oic es. 1. Invoices Apex arg ues that the UTC and P A 99671 demonstrate that

3 Sear s’ payment obli gations were adv ances again st a debt and p a yment w as not due unti l after Sear s’ final ret urns of Apex products in 2006. A cc o rdin g to Apex, a final accoun tin g of Sear s’ and Apex’s b usiness relat i onshi p w as requi red and the parties w ould settle any remain ing debts at that uns peci fi ed date in2006. Apex seeks to di sregar d the “Net 60 “ p r o vis i on, notwi thstandin g the fact that the ter m i s found in i ts own inv oic es. Indeed, the parties oper ated thro ughout the co urse of their dealings wi th the understanding that payment of inv oic es w as due sixty days from the date of the inv oic e. Apex arg ues that the “Net 60“ pr ov i si on i s not a partof the UTC, as the UTC i s to embody the whole agr eement betw een Apex and Sear s and “may not be supp leme nt e d or modi fi ed by course of dealing[.]” Supplementing the UTC wi th the course of dealing via the “Net 60“ arr angement, A p e x co ntends, contradic ts the explic i t language in the contract.

Apex contends tha t P A 996 71 , th e return reserve that Sears used to h ol d 3 b ack money fro m Apex fro m Jul y 6, 20 04 to March 31, 200 5, held ope n the obli gation to pay until the end of March 20 05

. PA 99 67 1, however, was not
a part of the UTC or any ag r e e me nt between the two partie s. Ra ther, PA 99 67 1 was an internal accounti ng mec hani sm tha t Se ars put fo rth to pl ace
a negative do l l ar deduc tio n on Apex’s account. Apex wa s not pr i vy to PA 99 67 1, nor woul d i t wan t to b e; the whol e purpo se of PA 99 67 1 was to withhol d funds fro m Apex.8 No. 12-3115
Under Illi noi s law

, “the objectiv e in interpr eting a contract i s to ascertain and giv e effect to the intent of the parties.” Gor e
v
. Alltel Commc’n s, LLC , 666 F .3d 1027, 1 0 3 3 (7t h Ci r
. 2012) (quoti ng Carey v
. Richards Bldg. Suppl y Co. , 856 N.E.2d 24, 27 (Ill. App. Ct. 2 0 0 6 ))

. Our interpr etat i on of the agr eement i s gui ded by “the objectiv e mani festati ons of the parties, inclu ding the language they used in the co nt r a ct .” Id

. Where the language i s plain, a contract should be enforced as wri tte n. Id

. It i s tr ue that the “Net 60“ ter m does not appear in the UTC. It i s also tr ue that the UTC prohibi ts supp lementing or modi fying the UTC wi thout the expr ess wri tte n consent of S e a rs, whi ch w as nev er prov i ded. And whi le the UTC menti ons how inv oic es are to be pai d, there i s nothing that indi cates when they are due. Thu s, under the UCC, the contract may be supp lemented to giv e full meaning to the parties’ intent. In the absenc e of explic i t contractual language, w e look to the parties’ conduc t to establi sh intent. Capitol Converting Equip., Inc. v
. LEP T ransp., Inc. , 965 F .2d 391, 396 (7th Ci r
. 1992) (“Where, as here,

an agr eement i s si lent on a particu lar ter m, a course of dealing may fi ll the v oid.”)

. The “N e t 6 0“ payment ter m w as i mplemented by both A p e x a nd Sear s, in wri tin g (on the inv oic es) and thro ugh the course of their d e a l ing. Whi le the ter m may not hav e been explic i tly wri tte n in the UTC, the parties clearly intended to oper ate under the “Net 60“ payment arr angement. Thus, payment w as due si xty days after Sear s received the inv oic e from Apex. Sear s receiv ed i ts last inv oic e from Apex on Nov ember 9, 2004, whi ch w ould render payment due on or before Janua r y 8 , 2 005. After that date, Apex w as aw are that Sear s w as not going to pay the inv oic e and the acti on w as ripe to bri ng sui t. Once a party i s appr i sed o f a br e ach, the statuteNo. 12-3115 9
of li mi tations begi ns to run. Koza sa v
. Guardian Elec. Mfg. Co. , 425 N.E.2d 1 1 3 7, 1 1 41 (Ill. App. Ct. 1981) (“The statute of li mi tations begi ns to run when facts exis t whi ch authorize the bri ngi ng of an acti on.”).
In accor d a nc e wi th the “Net 60“ payment arr angement, Apex knew that Sear s w as not going to pay the inv oic e si xty days from the date that i t w as i ssu ed. Thus, on January 8, 2005, Apex had a legal right to demand payment from Sear s. Armstrong v
. Hedlu nd Corp. , 738 N.E.2d 163, 169 (Ill. A p p. Ct. 2000) (“When a credi tor may legally demand payment from a debtor , a caus e of acti on ac crues and the s tatut e of li mi tations begi ns to run.”). Y

et Apex w ai ted unti l Mar ch 6, 2009 to assert i ts clai m ag ainst S ears, mo r e t han four y ears after the alleged breach occurred. Its clai m i s there fore barred by the s tatut e of li mi tations

. 2. Char ge-ba ck Deduc tions A p e x also alleges that Sear s ow es i t for charge-back deducti ons that date back to Decem be r 2 1 , 2004. Apex noted

such deducti ons each t ime Sear s wi thheld money from a payment that Apex di sagreed wi th. Again, Apex a r g ue s that these deducti ons w ere not act io nable at the tim e they w ere take n; r a t he r

, a final accoun tin g had to take place in or der to deter mine the fina l obli gations of the parties. But the parties

w ere clearly oper atin g u nder the “Net 60“ payment term and there fore each inv oic e w as being pai d indi vidu ally

. Thus, each ded uc t io n w as acti onable at the tim e i t w as take n. Hi-Lite Prods. Co. v
. Am. Home P rod s. Corp. , 11 F .3d 1402, 1408–9 (7th Ci r
. 1993) (“Each partial breach i s acti onable and subject to i ts
own accrual date and own l i mi tation period.”)

. Sear s w as not10 No. 12-3115
maki ng adv ance payments in anti ci pation of a fin a l a c c oun ti n g. Sear s pai d each inv oic e indi vidu ally and deci ded fo r e a ch inv oic e how much money w as to be deducted. It prov i ded thi s information to Apex and only sent the money t hat i t beli ev ed

w as ow ed. As a result, A p e x w as put on notic e that Sear s w as not going to pay the deducti ons a ft er each inv oic e. Apex ev en marked these “wrongful” deducti ons in i ts own Inv oic e Repor t. Nonetheless, for more than four y ears, Apex sat on i ts right to sue fo r money that i t w as allegedly ow ed by Sear s. Thi s i s the preci se behavi or that Sectio n 2–725 of the UCC prohibi ts. Ape x ’ s clai m has expired and i t cannot prev ai l again st Sear s. III. C O N C L U S I O N Apex knew that Sears ow ed i t money fo r goods, y et fai led to take any acti on for more than four years, placing i ts clai m outsi de of the li mi tations period set forth in the UCC as adopted in Illi noi s. Accordi ngly , w e AFF IRM the di stric t court’s gr anti ng of Se ars’ motion for summary judgment.